People facing repossession as well as those in the repossession business have a lot of legal issues to deal with. The laws regarding repossession vary from state to state, making it especially important to know what can and can not be done in an instance of repossession.
Repossession happens when a consumer owes on a tangible product on which they are in default. These are loans in which the product purchases is also the collateral; a car, for instance. Since these purchases are a form of loan, the buyer does not actually own the item until the loan has been repaid in full. In legal terms, the lender is the owner until that time. This means that the lender can take possession of the item without going to court if the borrower is in default.
The lender themselves is typically not in the business of repossession themselves. Rather than performing this function in house, they will retain the services of a company that specializes in repossessions to collect the property for them. In states where it is legal to perform repossession through such companies, there are still limitations on the methods that are legally allowable for these companies to take possession of the property. In most of these states, these are the legal issues that regulate the process of repossession:
• The borrower must be informed that the outstanding loan is in default and it must be spelled out in the loan agreement itself that defaulting on a specified number of payments will result in the lender taking action to repossess the item in question.
• Those carrying out the repossession are not permitted to commit any act that is illegal in the course of carrying out a repossession. They cannot illegally gain entry to a garage, house or other property in order to take possession of the item.
• The repossession agent or company is not permitted to cause any damage in the course of repossession. They cannot remove items from walls, damage cabinets or anything else in a kitchen while, for instance repossessing a stove.
• The creditor or the repossession agents cannot repossess any property or threaten to repossess any property other than that which the borrower actually owes money on. They cannot, for instance take possession of a boat that is on a trailer attached to a truck that is to be repossessed.
Under U.S. law, a repossession company or agent who violates these laws can see the repossession overturned in court and have to pay damages to the individual against who the repossession was carried out.
